Ponzi Schemes

In simple terms, a Ponzi scheme is an illegal business practice in which new investors' money is used to make payments to earlier investors. The investment scam rakes in as much money as possible and then disappears. The Ponzi schemer typically builds his con around what appears to be a legitimate business enterprise, but little or no commercial activity takes place. Floridians have seen multiple Ponzi schemes originated by local con men Arthur Nadel and Beau Diamond. In addition, several Floridians have been scammed by the Woodbridge Notes, a Ponzi scheme sold by Bender Wallace Mackey.

Ponzi schemes appear as investments in financial instruments, foreign exchanges, mortgage-backed investments, etc. but they turn out to be bottomless pits, taking the investor's money with little to no return on investment. They may find their victims by affiliating themselves with a social group such as a church group, social club, etc. If you happened to fall for their act, you are not alone! Attorney Andre Perron can help you determine if you have a good claim and if you do, he will aggressively prosecute your case to help you recover.


Common Investment Scams

The following list include some other common investment scams to be aware of:
  • Private securities offerings - if the offering lacks either regulatory scrutiny or the quality and quantity of disclosure of registered investments, it is most likely fraud;
  • Prime bank schemes - Promising tax-free, high-yield returns, fraudsters offer to let an individual investor into these supposed financial instruments from top overseas banks, otherwise offered only to the world's wealthiest investors. But prime banks do not exist, and the only profits from the scheme are the promoters.
  • Inside information - Someone claims to have inside or non-public information about a company or product that will soon send the stock price soaring. This information is almost always false and designed to get people to invest when they otherwise wouldn't. In any event, trading on "inside information" can be a violation of the law.
  • Investment seminars - Investors frequently get invited to free seminars that promise to educate them about investing strategies or managing money in retirement - often with an expensive meal provided at no cost. But just because someone buys you breakfast, lunch or dinner doesn't mean you have to buy what they are saying - or selling.
  • Promissory notes - While some promissory notes can be honest investments, those marketed broadly to individual investors are often scams. A promissory note is a form of debt that companies sometimes use, like loans, to raise money. But bona fide notes are marketed almost exclusively to corporate and other sophisticated investors.
  • Oil and gas - Popular in the mid-1980's, oil and gas scams tend to resurge as energy prices fluctuate. While some energy investments are legitimate, others are not. Oil and gas stock scams typically involve the touting of a small unknown company.
  • Microcap stocks - Information about these low-priced stocks issued by the smallest companies is often difficult to find. When good information is scarce, fraudsters can easily spread false information, profiting while creating losses for unwary investors.
  • "Risk-free" or "guaranteed" investments in exotic-sounding instruments - There is no "risk-free" investment. Offers of "guaranteed" investments are a red flag.

Common Tactics Used by Scammers

The following tactics are provided by saveandinvest.org:
  • Friendship - Befriending the investor to garner trust and do favors for their “new” friend;
  • Profiling - Asking seemingly benign questions about your health, family, political views, hobbies, or prior employees to find out your psychological "hot" buttons;
  • Fast talking - Bombarding you with a flurry of influence tactics;
  • Source credibility - Claiming to be associated with a reputable bank or possessing a special credential or experience to build up credibility;
  • Social consensus - Leading you to believe that a lot of other savvy investors have invested;
  • Comparison - Comparing two amounts in order to make one look better;
  • Commitment and consistency - Reminding customer of a previous commitment and showing them they are being inconsistent with it;
  • Fear - Scaring the customer into investing by painting a bad picture of what will happen if they don't invest.

Unsuitable Investments

Before you make an investment, your broker is required by law to assess the suitability of the investment for YOU – Does it meet your financial goals? Does it meet your investment objectives? Is it too risky for you? Often products that are unsuitable are recommended to an investor leading to substantial losses.

Private investments defined as investments not offered publically, such as warrants, promissory notes, preferred shares, are not subject to many of the SEC regulations. This poses an increased risk for an investor. Similarly, specialized investments such as real estate investment trusts and annuities, often create risks that are not fully disclosed to the investor. Following is a sample of products about which we are investigating the marketing and sale:
  • Lehman Brothers Principal Protected Notes
  • Regions Morgan Keegan "RMK" Funds
  • Behringer Harvard REITs
  • Apple REITs
  • Dividend Capital Realty
  • Fannie Mae Preferred Stock
  • Tenants in Common Real Estate
  • DBSI
  • KBS Real Estate Investment Trust
  • Provident Royalties
  • Cornerstone Core Properties REITs
  • Inland Western Retail Real Estate Trust

If you have concerns about your investment or your broker/financial advisor, call Andre Perron today at 941-827-2228 or through thefinanciallawyer.com. Mr. Perron offers prompt, honest, and personalized representation throughout the legal process.